The key technical hurdle standing between you and your truly self-driving car is a double-decker: the car needs to see its surroundings, and it needs to understand them, too. And today, Volvo announced a move that could help it clear both of those barriers: It has struck a deal with lidar maker Luminar, investing an undisclosed amount in the startup through its recently launched venture capital fund.

Just about every player in the autonomous driving space agrees lidar—which builds a 3-D map of its surroundings by firing millions of laser pulses every second and measuring how long they take to bounce back—is a vital sensor. The trouble is that it’s a relatively young technology, and it has taken a while for manufacturers to find the right mix of range, resolution, reliability, and cost. The biggest player in this space, Velodyne (which made the first lidar specifically for driving in 2005), sells its most capable sensor for $75,000. That unit sits on the roof of the car, spinning an array of 128 lasers to see the world.

Luminar - Lidar - Map - Software - Car

Luminar offers more than a lidar to build the all-important 3-D map: It also develops the software that tells the car’s brain which collection of points is a old man using a walker and which is a recycling bin. “We saw a gap there,” says Luminar CEO Austin Russell. (Just to make you feel bad, Russell, something of a photonics savant, left Stanford at...